Kiddies' cornucopia is not all it seems

By Neil Collins

12:01AM BST 21 Apr 2003

He's a clever one all right, that Gordon Brown. He knows exactly what sells. The Budget may have been as vacuous a piece of work as any recent chancellor has produced, but he knows that newspapers of all reading ages find babies irresistible.

So out of the hat comes the Child Trust Fund and sure enough, here are the pictures of smiling mums-to-be, winsome newborns and endless drivel about putting the kiddies first. Even by the standards of this administration, as a piece of cynical popular manipulation, it really takes the rusk.

This wretched measure is bad on almost every count. For a start, it reinforces the belief, already fostered by Generous Gordon, that money droppeth as the gentle rain from heaven, and blesseth him that gives and him that takes.

He that gives may not see it quite that way as he surveys his shrunken April pay slip, but the something-for-nothing culture has burgeoned since John Major gave us the lottery.

For every winner, there has to be corresponding losers, and it has nothing to do with skill, "investing" or how popular you are. Brown's baby bung perfectly captures this spirit of the times, since all you have to do to get it is to be born.

His new handout is still more cynical than that. The Budget speech made it all sound so immediate, with "at least £250 for all, rising to £500 for the poorest one third of children", plus the tease of the "proposal that during primary and secondary school years each child receive additional payments into their Child Trust Fund''.

Goodness, how splendid it all sounds! A veritable cornucopia for the kiddies - and backdated to everyone born since last September, too! And yes, there's even more: "Today's announcement is the foundation on which the Government will build in future Budgets and spending reviews." Hurrah for Gordon!

The small print, such as it is for this half-baked idea, tells a rather different story. The money won't be credited until 2005 and, even when it arrives, it may not actually be anything as vulgar as actual cash.

We must hope that the Child Trust Fund is not the sort of fantasy fund that supports National Insurance, a similar pyramid scheme dreamed up by a distant predecessor of Brown's, Nye Bevan. As he once put it in an unguarded moment: "The great secret about the National Insurance fund is that there ain't no fund." Instead, those making today's contributions pay the entitlements of yesterday's contributors.

In effect, your money buys nothing more than a promise, drawn on some future government long after the present one has gone. As bitter experience has shown with National Insurance and the state earnings-related pension (Serps), such promises are more honoured in the breach.

As far as we can tell, Brown's intention is for a voucher for £250 to be paid into an account that you can control, but it's possible that it may be a post-dated cheque, drawn on a date after 2021. From the Chancellor's point of view, this would be even better than tax and spend, since, by the time the first of his blessed babies reaches 18, finding the money will be someone else's problem.

In fact, the idea is dafter yet. His £500 for the poorest third of children promises work for another army of civil servants, who (presumably) will means-test each poorish parent, before deciding just how much the little bundle of delight will get. For those who can't face the 16-page form, with a further 20 pages of notes, it will be just the £250 - a silver Christening mug at other mugs' expense.

Apparently, parents and grandparents will also be allowed to chip in up to £1,000 a year. This may open a useful little tax avoidance device - but, once again, we don't know. Who decides where the money goes? Does it pay tax?

The magic of compound interest over 18 years can turn £250 into a useful sum, but to call it, as Brown did, "putting power, wealth and opportunity into the hands of the many not just the few" requires the imagination of those life assurance salesman who used to claim to turn £20 a month into £20,000.

Realistically, adjusted for inflation, the sum would turn into the equivalent of £350 if placed in a low-risk investment. That's nothing like enough to pay for a term's tuition fees at university. As for the down-payment on a flat, it won't get you through the estate agent's door.

Without sterling contributions from parents and grandparents, it's barely enough for a teenage party. Still, 18-year-olds are ingenious when it comes to such things, and it's a fair bet this is where most of the money will go on that day in the distant future when they get their mitts on it. After all, easy come, easy go.

This ridiculous measure was the centrepiece of a Budget that we could happily have managed without, and I hereby give notice that, if I'm Chancellor of the Exchequer in 2021, I won't pay out.

Apparently, "the Child Trust Fund symbolises the difference between those who believe in modernising the welfare state and those who wish it to wither away".

I can't for the life of me see how, but, if this is what the Chancellor truly believes, then the sooner his boss plucks up the courage to move him on in favour of someone who speaks English, the better off we shall all be.